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You are at:Home » Multifamily Sector Leads Commercial Real Estate Amid Mixed Market Trends
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Multifamily Sector Leads Commercial Real Estate Amid Mixed Market Trends

By Rent Magazine ContributorJune 1, 20253 Mins Read
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The U.S. commercial real estate market exhibited varied performance in April 2025, with the multifamily sector demonstrating robust demand, while office and industrial segments faced ongoing challenges. According to the National Association of REALTORS® (NAR), these trends reflect shifting dynamics across different property types.

Multifamily Market Shows Strength

The multifamily sector continued its strong performance, with annual net absorption increasing by 22% to over 544,000 units. Despite construction activity decreasing by 30% compared to the previous year, new supply still outpaced demand by 16%, maintaining vacancy rates at 8%. Rent growth remained modest at 1.1%, indicating a balanced market. High-demand metropolitan areas such as Dallas, New York, and Atlanta each absorbed over 20,000 units, signaling solid demand even in high-cost regions.

Office Sector Faces Continued Challenges

Office demand weakened again in April after a brief improvement in March, with net absorption turning negative and the vacancy rate rising to 14%. Rent growth remained flat at around 1% amid tenant caution. Class A offices maintained positive annual absorption but saw vacancies rise to 20.3%. Class B performed relatively better, with slower vacancy growth and stronger rent gains at 1.3%. Class C continued to struggle. Regionally, Boston and Los Angeles posted the largest losses, while San Francisco’s outflows slowed. New York rebounded sharply, swinging from -5 million square feet to +6 million square feet over the past year.

Retail Sector Remains Tight

The retail sector remained tight, with limited new supply. Rent growth decelerated to 1.8%, though tenants are still competing for prime space. Open-air neighborhood shopping centers, particularly those anchored by grocery stores, have become highly desirable to institutional investors due to increasing occupancy rates and steady returns. The scarcity of new retail construction, largely due to higher building costs, along with rising foot traffic, especially to grocery-anchored spaces, have contributed to this trend.

Industrial Sector Experiences Rising Vacancies

Industrial vacancies continued to climb, contributing to a deceleration in rent growth. Net absorption was nearly 60 percentage points lower than a year ago, while rent growth decelerated significantly, dropping to 3.0% from 7.9%. With additional new supply, the vacancy rate also rose to 6.6% from 5.1%. However, further declines in inflation and interest rates in the coming months may boost demand for goods and the volume of projects that were previously shelved or halted during construction.

Outlook

While the multifamily sector continues to demonstrate resilience, the office and industrial markets face ongoing challenges. The retail sector’s tight conditions suggest potential opportunities for investors, particularly in open-air shopping centers. Overall, the commercial real estate market remains in a state of flux, with sector-specific trends influencing investment and development decisions.

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